Does the definition of Gross Revenue for Fly Fitness include revenues from online sales?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
hem to us.
1 You must pay us a Continuing Royalty Fee equal to seven percent (7.0%) of the Gross Revenue generated weekly by your Franchised Business. "Gross Revenue" includes all revenues and income from any source derived or received by Franchisee from, through, by or on account of the operation
of the Franchised Business or made pursuant to the rights granted hereunder, including but not limited, any and all other revenues received using Franchisor's methods, operations and/or trade secrets whether received in cash, in services, in kind, from barter and/or exchange, on credit (whether or not payment is actually received) or otherwise. It does not include (i) any sales tax or similar taxes collected from customers and turned over to the governmental authority imposing the tax, (ii) properly documented refunds to customers, (iii) properly documented promotional discounts (i.e., coupons) or (iv) properly documented employee discounts (limited to 3% of Gross Revenue). Gross Revenue does not include gift card purchases, at the time of purchase, but Gross Revenue does include the redemption amount of purchases made by gift card.
Source: Item 6 — OTHER FEES (FDD pages 8–14)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, the definition of "Gross Revenue" is comprehensive and includes virtually all income sources. Specifically, Gross Revenue includes "all revenues and income from any source derived or received by Franchisee from, through, by or on account of the operation of the Franchised Business or made pursuant to the rights granted hereunder." This definition extends to any and all other revenues received using Fly Fitness's methods, operations, and/or trade secrets, regardless of whether the revenue is received in cash, services, or other forms of exchange.
This broad definition means that revenue from online sales would be included in Gross Revenue, as it falls under income derived from the operation of the franchised business and the use of Fly Fitness's methods. The FDD does not explicitly exclude online sales from the definition of Gross Revenue.
There are a few specific exclusions from Gross Revenue, including sales tax, properly documented refunds to customers, promotional discounts (i.e., coupons), and employee discounts (limited to 3% of Gross Revenue). Additionally, gift card purchases are excluded at the time of purchase, but the redemption amount of purchases made by gift card is included in Gross Revenue. These exclusions are explicitly defined, suggesting that any revenue not specifically excluded is intended to be included in Gross Revenue.
For a prospective Fly Fitness franchisee, this comprehensive definition of Gross Revenue is important because the Continuing Royalty Fee is calculated as 7% of weekly Gross Revenue. Therefore, understanding what constitutes Gross Revenue is crucial for accurately calculating and paying royalties to Fly Fitness. Franchisees should ensure they track all income sources, including online sales, to comply with the franchise agreement and avoid potential discrepancies or penalties.